Gold Loses Some of Its Shine on Profit-Taking

Gold snapped a three-day winning streak on Thursday and was on track for its biggest decline since November, as investors took profits following the latest surge in prices.

Overbought Resistance

Gold for April delivery fell $11.60, or 0.9%, to $1,336.30 a troy ounce on the Comex division of the New York Mercantile Exchange. It was down by as much as 1% earlier in the day.

The yellow metal was considered overbought following a three-day surge that took prices to new ten-month highs. The Relative Strength Index (RSI) peaked in the mid-70s on Wednesday but has since fallen back to 66.00. An RSI above 70 is a good indicator that the asset is overbought and due for a short-term correction.

Read: Chinese Lunar New Year stokes demand for gold.

May silver futures declined 30 cents, or 1.8%, to $15.99 a troy ounce. The grey metal approached eight-month highs in the previous session.

The U.S. dollar failed to rally on Thursday but appears to have emerged from a recent soft patch. The dollar index (DXY), which tracks the performance of the greenback against a basket of six rivals, held steady at 96.46.

Bulls Maintain Upper Hand

Gold’s bearish-to-bullish trend reversal began in the fourth quarter as traders used the traditional safe haven to hedge against global volatility. Strong demand from China, the world’s largest bullion consumer, has also underpinned the rally. Gold prices in Shanghai recently hit their highest in 31 months.

The yuan is playing a role in keeping China’s wholesale gold market priced at a significant premium relative to its peers in London. At last check, Chinese gold prices held a $10.50 per ounce premium over London quotes, once again signaling firm demand.

In the United States, a dovish pivot by the Federal Reserve could help accelerate gold’s recovery as traders worry less about declining liquidity and a stronger dollar. On Wednesday, the central bank released the minutes of its January policy meeting, where officials noted a “variety of considerations that supported a patient approach” to monetary policy. Read more: U.S. Stocks Rise as Fed Confirms Dovish Pivot.

For futures traders, this means further rate hikes will be put on hold for the foreseeable future as the Fed monitors stock-market volatility and slowing global growth.

Featured image courtesy of Shutterstock. Chart via Barchart.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi